OFW remittances crucial, but ‘tend to spoil the government’

E-balita
2 August 2006

Remittances of overseas Filipino workers (OFWs) help strengthen the Philippine economy, but they also have the potential to hurt the country’s poorer families, an economist said.

OFW remittances have made the government lax in working for the improvement of the domestic economy and will eventually make the economy sink with the decline in exports, resulting in loss of jobs, he added.

Dr. Ernesto Pernia of the School of Economics of the University of the Philippines Diliman raised these points in his talk on the “Diaspora, Remittances and Poverty in RP’s Regions.”

The Department of Economics and the Carolinian Economics Society of the University of San Carlos in Cebu City organized the talks last Friday night.

“Remittances tend to spoil the government,” he said, adding that the deployment of OFWs should only be temporary. Economic policies must be formulated to generate more local employment.

“The phenomenon should be transitory to allow the government to do its homework in making the economy stronger,” Pernia said.

The government’s complacency is one of the “moral hazard effects” of the increase in OFWs, aside from raising the number of broken Filipino families.

Although remittances have contributed to the decline in poverty incidence and improved the economy through higher gross domestic product (GDP), consumer spending and employment opportunities, they also have created an imbalance in the regions.

In a study on OFW contributions from 1995 to 2004, Pernia revealed that Southern Tagalog, the National Capital Region and Central Luzon, where about half of OFWs come from, also got 50 percent of the OFW remittances during the period.

Since working abroad and migration require money, poor regions have fewer workers leaving for jobs abroad.
However, the trend is now changing. Pernia noted that in 2004, the Autonomous Region for Muslim Mindanao, one of the poorest in the country, got 1.4 percent more in OFW remittances than the rest of the country.

This may indicate that OFWs from poorer regions had a “higher altruism” toward their more deprived families, Pernia noted. This could also mean they are simply remitting more.

Central Visayas, which ranked first in 1995 with a 1.6 percent higher annual average remittance, is now third.
However, he believes other factors, such as the increase in the deployment of highly skilled workers who earn more, could have contributed to this.

The Bangko Sentral ng Pilipinas expects OFW remittances to rise 10 percent this year, from a record $10.7 billion in 2005.

From January to May this year, remittances coursed through banks reached $4.85 billion, up 14.8 percent from the same months last year.

The bulk of remittances continues to come from the US, Saudi Arabia, Italy, United Kingdom, Japan, Hong Kong and United Arab Emirates.

There are over eight million Filipinos working abroad.

In a comparative study on the 15 regions in 1994, 1997, 2000 and 2003, Pernia noted that while the increase in remittances meant higher spending for 20 percent of the country’s poorest families, it also meant a higher purchasing power of the higher income groups.

“The richer households are benefiting more than the poorer households. There is an increasing income inequality. In time, it will worsen,” Pernia said.

However, while the migration of more OFWs is ongoing, Pernia recommended that the government should protect OFWs from unscrupulous recruiters, assist them in signing “fair and decent” employment contracts and lower the cost of remitting their income.

He also urged USC’s faculty to educate good leaders.

“I think what’s going to help us are good leaders,” he told them.

“The Filipinos have been letdown so many times from President Ferdinand Marcos to President Arroyo,” he added. By Charmaine Y. Rodriguez